FRONT ROYAL - As construction on the new Front Royal Police Department nears completion, the town is still trying to figure out a way to fund the $10.2 million project.
The town previously believed construction would be funded through the New Markets Tax Credit Program, which allows unknown private investors to get tax breaks by investing in low income areas. In August, however, the town learned that the Front Royal-Warren County Economic Development Authority had not closed on a $24 million low-interest loan through the program that would fund multiple capital improvement projects including the police station.
In addition to the deal never being closed, Councilman William Sealock noted that the credit was supposed to be for projects propelling job creation and the police station did not fall into that category.
Mayor Hollis Tharpe said that perhaps the tax credit program deal was “too good to be true.”
“It was a good deal, I mean the county bit too, so we’re not the only ones,” he said.
Finance Director B.J. Wilson told council members that the town’s best option to fund construction of the police department is through a Virginia Municipal League and Virginia Association of Counties loan.
A 20-year loan option would include annual payments of about $730,000 and require an annual additional budget allocation of $487,000. A 30-year loan would have annual payments of about $580,000 and require an additional annual budget allocation of about $337,500.
Wilson added that he is exploring the possibility of a 40-year loan from the United States Department of Agriculture’s rural development program. He said the interest rate on such a loan or whether the town would qualify is unknown due to the federal government’s shutdown. He added that the interest rate would likely be higher on such a long-term bond.
Based on 2018 housing assessments, Wilson said it would take about a 3-cent tax increase to cover the $337,500. He added that with new reassessments, that may decrease to about a 2.5-cent tax increase.
Councilman Jacob Meza said that he favors the 30-year loan and would like to see incremental tax increase dedicated toward the police station. He said such an increase should incorporate a sunset clause, which would remove the tax increase when the police station is paid off.
Councilman Eugene Tewalt agreed that the town should pursue the 30-year loan. He noted that he voted against the police station and that the town needs to stop approving projects without knowing from where funding is coming.
Town Manager Joe Waltz said the council has until about April to decide on a funding mechanism, at which point an application for the loan will be due.
Tharpe agreed that the town does need to decide and that it “would be terrible if the police department was repossessed.” Wilson said repossession is not a possibility and the town has many other alternatives before that would happen.